A Introduction: Acceptable audit risk refers to the level of risk an auditor is willing to accept for a given entity whose accounts are to be audited. If the acceptable audit risk is lower, the auditor will need higher level of assurance to believe the data and financial information given by the entity and vice versa. To find: The effect of the given situation on the acceptable audit risk. The effect on the acceptable audit risk will be insignificant. The company is going to make a public offering of its stock, which means all the proceedings of the issuance will be done by a professional or a registered broker. Therefore, the auditor would not assume the acceptable risk to change as the chances of a professional making mistakes is very low. Hence, the effect will be negligible. B Introduction: Acceptable audit risk refers to the level of risk an auditor is willing to accept for a given entity whose accounts are to be audited. If the acceptable audit risk is lower, the auditor will need higher level of assurance and vice versa. To find: The effect of the given situation on the acceptable audit risk. The acceptable audit risk will be higher. Since the company is already filing for bankruptcy, the auditor would believe that the risk of material misstatements would be high and that there will be errors in the financial statements so the acceptable audit risk would be higher. C Introduction: Acceptable audit risk refers to the level of risk an auditor is willing to accept for a given entity whose accounts are to be audited. If the acceptable audit risk is lower, the auditor will need higher level of assurance and vice versa. To find: The effect of the given situation on the acceptable audit risk. The acceptable audit risk will be high. Since the company has installed a new accounting information system , the employees will take some time to adapt to the technology and chances of making mistakes is more. It would directly affect the level of Control risk thereby affecting the acceptable audit risk as control risk is a part of the acceptable audit risk.

10th Edition

ISBN: 9781259293245

Author: Jr

Publisher: MCGRAW HILL BOOK COMPANY

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Solution Summary: The author explains that acceptable audit risk refers to the level of risk an auditor is willing to accept for a given entity whose accounts are to be audited.